Recently, a Chief Economist of Fannie Mae, who was speaking at a conference.
Many are not aware that Fannie Mae is a quasi-government agency that is heavily involved in the US housing sector.
Many are not aware that Fannie Mae is a quasi-government agency that is heavily involved in the US housing sector.
The economist was asked "what do you think of US housing right now?" He answered: “It’s overpriced.”
His presentation went DEEP into the data, showing that US housing is “late in the cycle,” meaning that prices may soon reach their peaks and then suffer a substantial correction.
Property prices nationwide across the United States have been rising at a much more rapid rate than wages and salaries. This is totally unsustainable.
A number of prominent real estate investors and developers have also spoken anecdotally that they’re no longer buying.
Everything is overpriced, and investment returns are falling.
Even more amazing, he told us that banks financed his most recent deals at unbelievable terms-- they loaned him hundreds of millions of dollars to fund his real estate projects at just 3%, on an interest-only basis.
This is crazy.
Considering that the official rate of inflation in the United States is nearing 3%, the banks practically loaned him the money for free.
Think about it-- he pays 3% interest, but the money loses nearly 3% of its value each year due to inflation... so essentially the money is zero cost.
What an unbelievably stupid loan for the banks to make: as I remarked to the audience, the banks are once again putting their customers’ funds at risk and receiving zero return in exchange.
This is another sign of a major bubble, similar to what happened ten years ago in the last crash.
Property prices rose far too much, far too quickly… and banks were making completely irresponsible loans with their customers’ money.
This post offers a critical analysis of the current real estate market, highlighting concerns about inflated property prices and irresponsible lending practices reminiscent of the pre-2008 financial crisis.
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